A

Abstract of Title
A written history of ownership to a specific area of land. An abstract of title covers the period from the original source of title to the present time and summarizes all subsequent documents that have been recorded against that area.

Acquisition Costs
Costs of acquiring property other than purchase price, for example, attorney fees, title insurance, and lender's fees.

Acquisition Loan
See Land Acquisition Loan.

Addendum
An agreement or list that is added to a contract, agreement, or other document such as a letter of intent. FHA and VA require that an addendum be added to or incorporated in a sales contract, if it is written prior to the appraisal.

Additional Principal Payment
A payment by a borrower of more than the scheduled payment due in order to reduce the remaining balance on the loan.

Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate is adjusted periodically according to a pre-selected index.

Adjusted Gross Income
A person's total income, as reported on his or her IRS 1040 tax return form, after allowable contributions, deductions, and expenses.

Adjustment Period
The period of time between the adjustment dates for an adjustable rate mortgage (ARM).

Alimony
Periodic payments made under a divorce decree or a written separation agreement toward the support of a former spouse.

ALTA
See American Land Title Association.

American Land Title Association (ALTA)
A national association of title insurance companies, abstractors, and attorneys specializing in real property law. The association speaks for the title insurance and abstracting industry and establishes standard procedures and title policy forms.

Amortization
Payment of a debt in regular, periodic installments of combined principal and interest.

Amortization Schedule
A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the remaining balance after each payment is applied.

Annual Percentage Rate (APR)
A measure of the cost to borrow money expressed as a yearly percentage. For mortgage loans, excluding home equity lines of credit, it includes the interest rate plus other charges or fees (such as mortgage insurance, discount points, and origination fees). For home equity lines, the APR simply reflects the interest rate. When shopping for a mortgage, you can use the APR to compare the costs of similar loans between lenders.

Applicant
A prospective borrower who has completed an application.

Application
A printed form (or verbal collection of data) used by a mortgage lender to record necessary information concerning a prospective mortgage.

Appraisal
A report made by a qualified person setting forth an opinion or estimate of property value. The term also refers to the process by which this estimate is obtained.

Appraised Value
An opinion of value reached by an appraiser based upon knowledge, experience, and a study of pertinent data.

Appraiser
A person qualified by education, training, and experience to estimate the value of real and personal property.

Appreciation
An increase in the value of property due to either a positive improvement of real estate in the area or the elimination of negative factors. Commonly used to describe an increase in value through inflation.

APR
See Annual Percentage Rate.

ARM
See Adjustable Rate Mortgage.

Arm's-Length Transaction
Legal slang meaning that there existed no special relationship between the parties involved in a transaction which would contaminate the result.

As Separate Property
Ownership in real property that is to be specifically excluded from community property.

Assessed Valuation
The value that a taxing authority places on real or personal property for the purpose of taxation.

Assessment
A charge against a property for purpose of taxation. This may take the form of a levy for a special purpose, or a tax in which the property owner pays a share of the cost of community improvements according to the valuation of his or her property.

Assumable Mortgage
A mortgage that can be taken over (assumed) by the buyer when a home is sold.

Attorney Fee
The amount a real estate lawyer charges for such transaction-related services as title research, contract review, registering all legal documents, and arranging for the transfer of security deposits and insurance certificates.

B

Balloon Mortgage
A mortgage that has level monthly payments that would fully amortize over a stated term, but which provides for a lump-sum payment to be due at the end of an earlier specified term.

Balloon Payment
A large lump-sum payment due at the end of some types of mortgages, home equity lines of credit, or home equity loans.

Bankruptcy
A proceeding in a federal court in which a debtor, who owes more than his or her assets, can discharge personal liability for his or her debts. This may affect a borrower's personal liability for a mortgage debt but not the lien of the mortgage.

Biweekly Mortgage
A mortgage with payments due every two weeks, totaling 26 payments a year.

Borrower
A person (also known as "the mortgagor") who receives funds in the form of a loan with an obligation to repay principal balance with interest.

Borrower Paid Mortgage Insurance (BPMI)
Insurance in which the cost of the mortgage insurance is added to the monthly mortgage payment. Borrowers have the right to request a cancellation of BPMI when the loan-to-value ratio reaches 80% of the original value. When the loan-to-value ratio reaches 78% of the original value, BPMI will be automatically terminated.

Break-Even Point
The point at which a revenue or gain is equal to total expenses.

Buydown
Money advanced by an individual (builder, seller, etc.) to reduce the monthly payments for a home mortgage either during the entire term or for an initial period of years.

C

Cash-Out Refinancing
When the principal amount of a new mortgage is greater than the outstanding balance of the existing mortgage being refinanced, and a portion of the equity is converted to loan proceeds for the borrower's use.

Cash Reserve
The portion of assets that a borrower will have after the loan closing. Cash reserves may be required as part of the loan process to ensure the borrower has financial flexibility after the transaction.

Cash to Close
Liquid assets that are readily available to be used to pay the closing costs involved in closing a mortgage transaction.

Changed Circumstance
A situation that requires the lender to provide a revised Loan Estimate or Closing Disclosure before closing, that describes any changes in fees or other loan terms.

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Closing
The closing includes the delivery of a deed, the signing of loan documentation, and the disbursement of funds necessary to complete the sale and loan transaction. Also known as "settlement."

Closing Costs
Money paid by the borrower in connection with the closing of a mortgage loan. This generally involves an origination charge, discount points, and fees for required third-party services, taxes, and government recording fees.

Closing Disclosure
A document provided to customers at least 3 business days before closing that shows the actual terms and costs of the loan. These costs may include hazard and/or mortgage insurance premiums and escrow deposits for property taxes.

Closing Statement
A form used at closing that gives an account of the funds received and paid at the closing, including the sales price, closing costs, escrow deposits for taxes, hazard insurance, and mortgage insurance.

Co-Borrower(s)
Additional borrower(s) whose income contributes to qualifying for a loan and whose name(s) appear on documents with equal legal obligations.

Collateral
Property pledged as security for a debt, such as the real estate pledged as security for a mortgage.

Collection
The servicing procedure followed to bring a delinquent mortgage "current" and to file the required notices to bring foreclosure when necessary.

Commitment (Loan)
A binding pledge made by the lender to the borrower to make a loan, at certain (or maximum) loan terms within a given period of time for a given purpose, subject to various stated conditions.

Commitment Letter
A formal letter sent by a lender stating the terms and conditions under which the lender agrees to loan money to a potential borrower.

Comparable Properties
Properties used for comparative purposes in the appraisal process that have been recently sold and have characteristics similar to property being appraised, thereby indicating the approximate fair market value of the subject property.

Compensating Factors
Positive characteristics of a borrower's credit, employment, or savings history which may be used to offset high debt-to-income ratios in the underwriting process.

Concession
A discount or other incentive given by a landlord or seller to a prospective tenant or buyer to induce them to sign a lease or purchase property.

Conforming Loan
Conventional home mortgages eligible for sale and delivery to either the Federal National Mortgage Association (FNMA, also known as "Fannie Mae") or the Federal Home Loan Mortgage Corporation (FHLMC, also known as "Freddie Mac"). These agencies generally purchase first mortgages up to loan amounts mandated by Congressional directive.

Contingency
A condition that must be met before a contract is legally binding.

Conventional Mortgage
A mortgage not obtained under a government program (such as FHA or VA).

Convertible ARM
An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.

Cooperative
A building of two or more dwelling units that is owned by a corporation made up of people in the building. The right to occupy a unit is obtained by buying shares of stock in the corporation and signing an occupancy agreement known as a "proprietary lease".

Covenant
A clause in a contract that obligates or restricts the parties and which, if violated, can result in legal action.

Credit Limit
The maximum amount a customer is approved to borrow for a home equity line of credit.

Credit Report
A report detailing an individual's credit history.

D

Debt-to-Income Ratio (DTI)
Often used in qualifying a consumer for a home loan, DTI reflects the consumer's monthly debt and debt-related costs, such as taxes, fees, and insurance premiums as a percentage of their monthly gross income.

Deed
The legal document conveying title to a real property.

Deed of Trust
An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary), and reconveyed upon payment in full.

Default
The failure to satisfy the terms as agreed in a contract.

Delinquency
A loan payment that is overdue, but within the period allowed before actual default is declared.

De minimis PUD
A Planned Unit Development (PUD) in which the common property has less than a 2% influence upon the value of the premises. The 2% rule of thumb is calculated by dividing the dollar amount of amenities by the total number of units.

Department of Housing and Urban Development (HUD)
A governmental entity responsible for the implementation and administration of housing and urban development programs. HUD was established by the Housing and Urban Development Act of 1965 to supersede the Housing and Home Finance Agency.

Department of Veterans Affairs (VA)
A cabinet-level agency of the federal government. The Servicemen's Readjustment Act of 1944 authorized the agency to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. Among the benefit programs is the VA Home Loan Guaranty program, which encourages mortgage lenders to offer long-term, no-down-payment financing to eligible veterans by partially guaranteeing the lender against loss upon foreclosure.

Deposit
A sum of money given to bind a sale of real estate. Also known as "earnest money."

Depreciation
A loss of value in real property brought about by age, physical deterioration, functional, or economic obsolescence.

Disclosure
Information relevant to specific transactions that is required by law.

Discount Points
Discount points are charges paid to the lender voluntarily, usually at closing by the borrower or seller, to reduce the interest rate. One point is equal to 1 percent of the principal amount of the mortgage.

Discounted Loan
When the interest rate on a loan is less than the market rate, it is a discounted loan. However, the lender requires additional discount points to raise the yield or return on the loan to the market rate.

Down Payment
Money paid to make up the difference between the purchase price and the mortgage amount.

Draw Period
The fixed period of time — usually 10 to 15 years — during which a borrower may access or "draw" money from a home equity line of credit.

E

Earnest Money
Funds delivered to the seller or an escrow agency by the purchaser with the purchase agreement as evidence of good faith.

ECOA
See Equal Credit Opportunity Act.

Encroachment
An improvement that illegally violates another's property or right to use that property.

Encumbrance
Anything that affects or limits the fee simple title to property, such as mortgages, liens, leases, easements, or restrictions.

End of Draw
For a home equity line of credit, end of draw is the point at which the draw period ends and the borrower can no longer access the funds. Most line of credit plans have a 10- or 15-year draw period. Depending on the original contract, the borrower may be required to repay the outstanding balance with fully amortized monthly payments that include principal and interest or a single balloon payment.

End of Term
For a balloon home equity line of credit or an existing balloon home equity loan, end of term refers to the date the outstanding balance becomes due in full. See also Maturity Date.

Equal Credit Opportunity Act (ECOA)
A Federal law requiring lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, sex, age, marital status, receipt of income from public assistance programs, or past exercising of rights under the Consumer Credit Protection Act.

Equity
The ownership interest; the portion of a property's value over and above the liens against it. Equity is determined by subtracting the amount owed from the value of the home and would register as a percentage when the difference is divided by the value of the home.

Escrow
An item of value, money, or documents, deposited with a third party, to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate. In some parts of the country, escrows of taxes and insurance premiums are called impounds or reserves.

Escrow Account
The segregated trust account in which escrow funds are held.

Escrow Agent
The person or organization having a responsibility to both the buyer and seller (or lender and borrower) to see that the terms of the purchase/sale (or loan) are carried out. Also called escrow company or escrow depository.

Escrow Payment
That portion of a mortgagor's monthly payments held by a lender or servicer to pay taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also called impounds or reserves in some states.

Estimated Closing Date
See Closing Date.

Estimated Settlement Charges
See Closing Costs.

F

Federal Home Loan Mortgage Corporation - FHLMC (Freddie Mac)
A stockholder-owned corporation created by Congress that purchases conventional mortgages in the secondary mortgage market from insured depository institutions and HUD-approved mortgage bankers. It sells participation sales certificates secured by pools of conventional mortgage loans, their principal, and interest guaranteed by the federal government through the FHLMC. It also sells Government National Mortgage Association (GNMA, or "Ginnie Mae") bonds to raise funds to finance the purchase of mortgages. Popularly known as "Freddie Mac".

Federal Housing Administration (FHA)
The federal agency in the Department of Housing and Urban Development (HUD) that insures residential mortgages.

Federal National Mortgage Association- FNMA (Fannie Mae)
A taxpaying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) as well as conventional home mortgages.

Fee Simple
The greatest possible interest a person can have in real estate, including the right to dispose of the property or pass it on to one's heirs.

First Adjusted Payment
The estimated monthly payment due when the interest rate on an adjustable-rate mortgage is reset. After the initial fixed-rate period, the interest rate can increase or decrease annually according to the market index. Any change may significantly impact the monthly payment.

First Mortgage
A real estate loan that has priority over any subsequently recorded mortgages.

Fixed Interest Rate
An interest rate that does not change during the loan term.

Fixed-rate Advance (FRA)
A variable-rate home equity line of credit feature that allows the mortgagor to secure, or "fix", the interest rate on all or a portion of their balance.

Fixed-rate Mortgage (FRM)
A mortgage in which the interest rate and monthly payments remain the same for the life of the loan.

Foreclosure
A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.

G

Gift Letter
A written explanation signed by the individual giving the gift stating, "This is a bona fide gift, and there is no obligation expressed or implied to repay this sum at any time."

Ginnie Mae
Created in 1968 by an amendment to Title III of the National Housing Act (12 USC 1716 et seq.), this federal government corporation is a constituent part of the Department of Housing and Urban Development. Among other governmental functions, it guarantees securities backed by mortgages that are insured or guaranteed by other government agencies. Also called Government National Mortgage Association (GNMA).

Good Faith Estimate (GFE)
For purchase and refinance applications taken before October 3, 2015, lenders must deliver or mail a Good Faith Estimate (GFE) to the customer within 3 business days of application. The GFE shows approximate costs the customer will pay at or before closing. Note: For new purchase and refinance applications taken on or after October 3, 2015, customers receive a Loan Estimate within 3 business days of application outlining the approximate costs and terms of the loan.

Government National Mortgage Association (GNMA)
See Ginnie Mae.

Gross Income
Total income before any expenses are deducted.

Gross Monthly Income
Total monthly income earned before tax and other deductions.

H

Hazard Insurance
Contract with an insurance provider that specifically covers damage to a property due to certain hazards such as fire.

High-Ratio Loan
Mortgage loan with a loan- to-value higher than 80 percent. Calculated using the loan amount divided by the lower of the sales price or appraised value.

Home Equity Line of Credit
A form of revolving credit secured by a borrower's home. A borrower is approved for a specific credit limit and can draw on those funds up to the limit as needed during the draw period, making monthly payments as required according to the signed contract.

Home Equity Loan
A loan secured by a customer's home. The customer receives the full loan amount upfront, then makes monthly payments as required by the loan terms. Note: Although we continue to service existing home equity loans, Wells Fargo does not currently offer new home equity loans.

Home Mortgage Disclosure Act (HMDA)
Federal legislation that requires certain types of lenders to compile and disclose data on where and to whom their mortgage and home improvement loans are being made.

Home Valuation Code of Conduct (HVCC)
The Home Valuation Code of Conduct establishes standards for solicitation, selection, compensation, conflicts of interest, and appraiser independence. It became effective May 1, 2009, for any mortgage that will be sold to Fannie Mae or Freddie Mac; Federal Housing Administration (FHA) and Federal Home Loan Bank (FHLB) mortgages are not covered in the agreement.

Homeowners' Association Dues
The fees imposed by a condominium or homeowners' association for maintenance of common areas.

Homeowner's Insurance Policy
A multiple-peril insurance policy available to owners of private dwellings that covers the dwelling and its contents, as well as personal liability.

Housing and Economic Recovery Act (HERA)
Federal legislation enacted in 2008 to address the subprime mortgage crisis . It was intended to restore confidence in Fannie Mae and Freddie Mac by strengthening regulations and injecting capital into the two large U.S. suppliers of mortgage funding.

Housing and Urban Development (HUD)
See Department of Housing and Urban Development.

Housing Expense Ratio
The relationship of a borrower's monthly housing payment (PITI and other housing expenses), divided by the borrower's gross monthly income, expressed as a percentage. Also called the "top ratio."

HUD
See Department of Housing and Urban Development.

I

Impounds or Reserves
Terms used to mean "escrow" in some parts of the country. See Escrow.

Income/Expense Ratio
See Debt-to-Income Ratio (DTI)

Index/Index Rate
A published interest rate, such as the prime rate, LIBOR, T-Bill rate, or the 11th District COFI. Lenders use indexes to establish interest rates charged on mortgages or to compare investment returns. On ARMs, a predetermined margin is added to the index to compute the interest rate adjustment.

Installment
The regular payment that a borrower agrees to pay a mortgage lender.

Interest
Amount of money paid for the use of funds provided by another party. Also a right, share, or title in property.

Interest Rate
The percentage of an amount of money that is paid for its use for a specified time.

Interest Rate Cap
A provision of an ARM limiting how much the interest rate may increase per adjustment period. See also Lifetime Cap.

Interest Rate Floor
On a floating-rate loan or line of credit, the lowest the interest rate may go.

Interest Rate Range
See Rate Lock Option.

Investment Property
Real estate owned with the intent of supplementing income and not intended for owner occupancy.

J-K

Joint Tenancy
An undivided interest in property, taken by two or more joint tenants. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.

Judgment
Final determination by a court of the rights and claims of the parties to an action.

L

Land Acquisition Loan
A loan made for the purpose of purchasing land only, not improvements on or to the land. Also called an "acquisition loan" or "lot loan."

Late Charge
The penalty a borrower must pay when a payment is made after its due date or courtesy period.

Lender Paid Mortgage Insurance (LPMI)
Mortgage insurance with its cost included in the interest rate. Although the interest rate is slightly higher with LPMI, this option usually results in a lower monthly payment and a potential tax deduction. (Consult your tax advisor).

Liability Coverage
Insurance designed to protect against expenses incurred due to bodily injury or property damage resulting from acts of, or neglect by, the insured.

Lien
A legal claim or attachment against property as security for payment of an obligation.

Lifetime Cap
A provision of an ARM that limits the total increase in interest rates over the life of the loan.

Limited Partnership
A form of business ownership that consists of one or more general partners who are fully liable, and one or more limited partners who are liable only for the amount of their investment.

Line of Credit
An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain length of time, based upon the loan's purpose, the borrower's ability to repay, and the collateral for the line. (See also Home Equity Line of Credit.)

Liquidity
The ability to readily convert assets or investments to cash.

Loan Estimate
A document delivered or mailed to customers by a lender within 3 business days of mortgage application. The Loan Estimate provides an estimate of closing costs and fees as well as the loan terms.

Loan Product
Describes the type of loan and includes fixed- or adjustable-rate (ARM) options; the loan term, which is the time you will spend repaying the loan; and whether the loan is insured by a government agency (such as the FHA or VA), or non-government loan.

Loan- to-Value (LTV)
The ratio of the amount of a potential mortgage to the value of the property it is intended to finance, expressed as a percentage.

Lock Expiration Date
The interest rate range can only be locked for a set number of days. The rate lock option will expire after the lock expiration date.

Lock-in Period
The number of days before a loan closing in which a customer's loan is protected from financial market fluctuations in interest rates. Locking in an interest rate range doesn't guarantee the specific rate that applies at closing. The final interest rate is determined by specific transaction characteristics and the borrower's credit profile up until loan closing.

London Interbank Offered Rate (LIBOR)
The rate at which banks in the foreign market lend dollars to one another. LIBOR varies by deposit maturity. A common interest rate index; one of the most valid barometers of the international cost of money.

Loss Payable Clause
An insurance policy provision for payment of a claim to someone, other than the insured, who holds an insurable interest in the insured property.

M

Manufactured Home
Factory-built or prefabricated housing, including mobile homes.

Margin
The set percentage the lender adds to the index rate to determine the interest rate of an ARM.

Market Price
The price people agree to pay for something at a given moment at a given place.

Market Rate
Estimated average interest rate being charged by lenders for conventional loans.

Market Value
The most probable price that a ready, willing, and able buyer would pay and a willing seller would accept, assuming each is fully informed and under no pressure to act. The market value may be different from the price for which a property can actually be sold at a given time (market price).

Maturity Date
The date when a loan's final payment or loan balance must be paid in full. For a balloon home equity line of credit or an existing balloon home equity loan, the maturity date is when the outstanding balance becomes due in full.

Mobile Home
A factory-assembled residence consisting of one or more modules and a chassis and wheels that are an integral part of the structure and need not be removed in order to make the module(s) occupiable.

Modular House
A factory-assembled residence built in units or sections, transported to a permanent site, and erected on a foundation. Excludes mobile homes.

Monthly Payment
Usually, the amount of PITI (principal, interest, taxes, and insurance) paid each month on a mortgage loan.

Mortgage
The transfer of an interest in real property, given as security for the payment of a loan.

Mortgage Broker
A company that matches borrowers with lenders for a fee.

Mortgage Commitment
An agreement between lender and borrower detailing the terms of a mortgage loan such as interest rate, loan type, term, and amount.

Mortgage Insurance
See Private Mortgage Insurance.

Mortgage Insurance Premium (MIP)
The consideration a mortgagor (borrower) pays to either the FHA or a private insurer for mortgage insurance.

Mortgage Note
A written agreement to pay a sum of money at a stated interest rate during a specified term. The note contains a complete description of the conditions under which the loan is to be repaid and when it is due.

Mortgagee
The lender on a mortgage transaction.

Mortgagor
The borrower in a mortgage transaction. The mortgagor pledges property as security for the debt.

Mortgage Loan Originator
According to federal regulations, a Mortgage Loan Originator (MLO) is defined as anyone who takes a mortgage loan application and presents or negotiates the terms of a residential mortgage loan for compensation or gain.

N

Nationwide Mortgage Licensing System and Registry (NMLSR)
The Nationwide Mortgage Licensing System and Registry (NMLSR) is a repository developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. The purpose of the NMLSR is to streamline the licensing process, improve supervision, and increase transparency in residential lending .

Negative Amortization
A loan payment schedule in which the outstanding principal balance goes up, rather than down, because the payments do not cover the full amount of interest due. The unpaid interest is added to the principal balance.

Negative Points
A cash rebate paid by lenders to a mortgage broker or the borrower for a mortgage with an interest rate above the lender's par interest rate. A rebate credited to the borrower is typically used to defray loan settlement costs. The rebate may not exceed loan settlement costs, nor be used as part of the down payment.

Neighborhood Stabilization Program (NSP)
A program funded by the Department of Housing and Urban Development (HUD) through the American Recovery and Reinvestment Act (ARRA) of 2009 and designed to provide funds to assist homebuyers in purchasing foreclosed residential properties in targeted areas for the purpose of stabilizing neighborhood property values.

NMLSR ID
A number or other identifier that permanently identifies a registered residential loan originator. The Unique Identifier is assigned by protocols established by the Nationwide Mortgage Licensing System and Registry and other agencies. It also may be referred to as a Unique ID.

Non-Conforming Loan
Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines.

Note
A general term for any kind of paper or document signed by a borrower that is an acknowledgment of a debt, and is, by inference, an agreement to repay that debt. When the note is secured by a mortgage, it is called a mortgage note and the mortgagee is named as the payee. (See Mortgage Note)

O

Occupancy
The use of a property as a full-time residence, either by the titleholder (owner-occupied) or by another party through a formal agreement (rental).

Origination
The act of securing a completed mortgage application from a commercial or residential borrower and seeing that loan through to loan closing.

Origination Charge
One amount that includes all charges (other than discount points) that all loan originators (lenders and brokers) involved in the transaction will receive for originating the loan. This includes any application, processing, underwriting fees, and payments from the lender to the broker for origination.

P

Payoff Figures
The unpaid principal balance and escrow amounts to be used in calculating full payment of the mortgage or for the closing sale of the property.

Payoff
The amount that will pay off a loan in full. In general, a borrower can pay off a loan more quickly by making larger or more principal payments than required. Borrowers should check their contract terms to determine if there are any early payoff fees or penalties.

Percentage Point
One percent of the loan or a measure of the interest rate.

Personal Property
Usually considered to be property that is moveable, as opposed to real property such as vacant or improved land.

PITI (Principal, Interest, Taxes, and Insurance)
Principal, interest, taxes and insurance are the most common components of a monthly mortgage payment.

Planned Unit Development (PUD)
A comprehensive development plan for a large land area. A PUD usually includes residences, roads, schools, recreational facilities, and commercial, office and industrial areas. A PUD may also be a subdivision with lots of areas owned in common and reserved for the use of some or all of the owners of the separately owned lots. See also De minimis PUD.

Plans and Specifications
Architectural and engineering drawings and specifications for construction of a building or project. They include a description of materials to be used and the manner in which they are to be applied.

Power of Attorney
A legal document authorizing one person to act on behalf of another.

Preapproval
A preapproval letter indicates that you have been preapproved for a specified mortgage amount based on a preliminary review of your credit information .

Preliminary Title Report
The results of a title search by a title company prior to issuing a title binder or commitment to insure clear title.

Prepaids
A portion of the total closing costs related to the mortgage loan that are collected at loan closing, including per diem pre-paid interest and initial deposits of monthly escrows for taxes and insurance.

Prepayment Fee or Penalty
A provision in the lending contract that states the borrower will pay a fee in the event the borrower pays off the loan earlier than was originally agreed.

Prequalification
The process of estimating how much money a prospective homebuyer may be eligible to borrow prior to applying for the loan. Prequalification does not include a credit check and should not be confused with Preapproval.

Primary Residence
The residence that the borrower intends to occupy as their principal residence.

Principal
The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.

Principal Balance
The remaining balance due on a debt, exclusive of accrued interest.

Principal Payment
The portion of a monthly payment that goes toward reducing the principal balance. Borrowers should strive to make additional principal payments whenever possible to pay down a loan balance faster and possibly reduce the amount of interest paid over the term of the loan.

Private Mortgage Insurance (PMI)
Insurance written by a private company protecting the mortgage lender against loss resulting from a mortgage default.

Processing
The preparation of a mortgage loan application and supporting documentation for consideration by a lender or insurer.

Property Usage
Denotes whether a property is a first home, second home, vacation home or a rental property.

Purchase Contract (Agreement/Offer)
An agreement between a buyer and seller of real property, setting forth the price and terms of the sale. Also known as a "sales contract."

Q

Qualifying Ratios
Guidelines applied by lenders to determine how large a loan to grant a homebuyer. See Housing Expense Ratio, Income/Expense Ratio and Debt-to-income Ratio.

Quitclaim Deed
A deed relinquishing all interest, title, or claim an owner has in a property. A quitclaim deed implies no warranty.

R

Rate Lock Option
Your interest rate range can either be locked or not locked. The interest rate range on the date and time you lock remains available to you for a set period of time and is unaffected by financial market fluctuations during this time. If your interest rate range is locked, the interest rate on your application will generally remain the same if there are no subsequent changes to the loan. If there are changes, your final interest rate at closing may be different, but will still fall within your interest rate range, as long as your rate lock period has not expired.

Real Assets
Real estate or real property owned by an individual or business.

Real Estate
See Real Property

Real Estate Owned (REO)
A foreclosed property, also known as a Real Estate Owned (REO) property, is a home that was once customer owned but is now owned by a bank. A foreclosure can occur when mortgage payments are not made over a period of time and measures taken to help are not satisfied.

Real Estate Settlement Procedures Act (RESPA)
A federal law requiring lenders to provide home mortgage borrowers with information on known or estimated settlement costs. It also establishes guidelines for escrow account balances.

Real Property
Property that includes land and anything affixed to the land, such as buildings and leasehold improvements. It may also include whatever is beneath the land (e.g., minerals, natural gas) and rights to the use of the property.

Refinancing
The repayment of a debt from the proceeds of a new loan using the same property as security.

Reissue or Refinance Rate (for Title Insurance)
A reissue or refinance rate is a reduced rate for title insurance that a homeowner may be eligible for on a refinance. The reduced rate may be applicable if the property was previously insured within a certain number of years.

Repayment Period
For a standard home equity line of credit, the point at which a borrower must begin to make fully amortizing monthly payments, or principal-and-interest payments that will completely repay the outstanding balance during a certain period of time.

Rescission Period
Under federal law, certain loan transactions secured by your home are subject to a rescission, or cancellation, period. Following receipt of all required disclosures and consummation of the contract, each owner of the property has up to three full business days to cancel the transaction. The right to cancel does not apply to loans made to purchase, construct, or acquire a primary residence, or to transactions secured by a secondary residence, vacation home, or rental property.

Reserves or Impounds
Terms used to mean "escrow" in some parts of the country. See Escrow.

Revolving Line of Credit
A line of credit that gives the borrower the ability to access available funds during the specified draw period. As the borrower pays down the principal, more credit becomes available during the draw period, up to the total amount of the approved line of credit.

S

Sales Contract
See Purchase Contract.

Satisfaction of Mortgage
The document issued by the lender verifying full payment of a mortgage debt.

Second Home (Vacation Home, Weekend Home)
A residence other than the borrower's primary residence which the borrower intends to occupy for a portion of each year. The residence must be occupiable year-round.

Second Mortgage
A mortgage that has rights that are subordinate to the rights of the first mortgage holder. Home equity loans are often referred to as second mortgages because the borrower typically is still paying off their home mortgage; if the home mortgage is paid off, the home equity loan is then considered to be a first mortgage.

Secondary Mortgage Market
A market where existing mortgages are bought and sold. It contrasts with the primary mortgage market, where mortgages are originated.

Section 203(k) Loan Program
HUD's primary program for the rehabilitation and repair of single-family properties. A 203(k) loan is a first mortgage that covers the costs of rehabilitation and purchase or refinance of an eligible property. The goals of the Section 203(k) loan program are community and neighborhood revitalization and expanded opportunities for homeownership for low- and moderate-income families.

Security
Collateral or property given, deposited, or pledged to secure the repayment of a loan.

Security Instrument
Mortgage or Deed of Trust evidencing the pledge of real estate as collateral for the loan.

Security Interest
The interest of a creditor in the security acting as collateral for an investment.

Seller Contributions
Payment by the seller or any other interested party of some or all of the purchaser's usual closing costs. Investors and insurers sometimes limit the amount of seller contributions and require lenders to adjust the property's value if contributions exceed limitations. Undisclosed seller contributions (such as decorating allowances, appliances, or payment of moving expenses) are made to borrowers outside of closing and are also subject to investor and insurer restrictions.

Servicing Released
A stipulation in the agreement for the sale of mortgages in which the seller is not responsible for loan administration.

Settlement
See Closing.

Settlement Costs
Money paid by borrowers and sellers to effect the closing of a mortgage loan, including payments for title insurance, survey, attorney fees, and such prepaid items as escrow for taxes and insurance.

Settlement Services
Services provided by the lender at the closing of a loan.

Settlement Sheet
The computation of costs payable at closing that determines the seller's net proceeds and the buyer's net payment.

Settlement Statement (HUD-1)
For purchase and refinance applications taken before October 3, 2015, customers receive a HUD-1 Settlement Statement at closing that details the fees associated with closing the loan. Note: For new purchase and refinance applications taken on or after October 3, 2015, at closing customers will receive a Closing Disclosure detailing the terms and closing costs of the transaction.

Site Value
The value of land without improvements, as if vacant.

Subdivision
Improved or unimproved land divided into a number of parcels for sale, lease, financing, or development.

Subordinate
To make subject or junior to. For example, a loan on vacant land is made subject to a subsequent construction loan. Also described as a Second Mortgage. See First Mortgage.

Survey
The measurement and description of land by a registered surveyor.

T

Tax Lien

A claim against property for unpaid taxes.

Tenancy
The use of real estate under any kind of right of title.

Term
The time limit within which a loan must be repaid.

Title
The legal evidence of ownership rights to real property.

Title (Insurance) Company
A company that confirms the legal owner of a property and insures a homeowner and lender against a loss that could result from a title dispute.

Title Insurance
An insurance policy that protects a lender and/or homebuyer (only if homebuyer purchases a separate policy, called owner's coverage) against any loss resulting from a title error or dispute. On a refinance, if the property has had a recent title insurance policy, a homeowner may sometimes be eligible for a reduced rate on the title insurance (also known as the reissue or refinance rate) .

Title Insurance Policy
A contract in which an insurer, usually a title insurance company, agrees to pay the insured party a specific amount for any loss caused by defects of title on real estate in which the insured has an interest as purchaser, mortgagee, or otherwise.

Title Search
An examination of public records to disclose the past and current facts regarding the ownership of a given piece of real estate.

Top Ratio
See Housing Expense Ratio.

Torrens Certificate
A certificate issued by a public authority called a registrar of titles, establishing title of an indicated owner. Used when title to property is registered under the Torrens system of land registration.

Transfer Tax
State or local tax payable when the title passes from one owner to another.

Trust Deed
See Deed of Trust.

Truth-in-Lending Act
A Federal law requiring full disclosure of credit terms using a standard format. This is intended to facilitate comparisons between lending terms and financial institutions.

U-Z

Underwriting
Analysis of risk and setting of appropriate rate and terms for a mortgage on a specific property for specific borrowers.